Andrei Bennett | Public procurement complexities

Public procurement is government’s activity of acquiring goods, works and services from economic operators or suppliers to enable government’s delivery of its mandates. It is far more than mere transactional purchasing. Transactional purchasing is mostly about swiftly exchanging money for goods or services.

Public procurement is concerned with the systems and practices by which Jamaica invests nearly 30 per cent of gross domestic product, up to US$5 billion per annum, to finance procurement contracts that are meant to create public value. To this end, careful thought is given to understanding and defining the needs to be fulfilled by each acquisition, the nature and configuration of the market from which the goods will be acquired, and increasingly to considerations of sustainability and national development.

Given that Jamaica is not a primary manufacturer of goods, our supply chains are prone to exogenous shock and other external market forces. To truly understand the system then, one must view it through multi-disciplinary lens – combining ideas from economics, law, business management and operations, and common sense.

TWO MAIN OUTCOMES

Broadly, the public procurement system is committed to two main outcomes. The first is the public benefit to be derived from the effective implementation of procurement contracts. By these contracts, the system delivers the bridge that enables safe movement of people and goods, or the janitorial services that protect our assets from erosion and decay, and sustain the health of workers. Measuring the achievement of this first commitment is mostly done by enquiring into value for money – a weighty term to describe levels of economic efficiency.

The second commitment is the formation of contracts in a manner that inspires confidence in government and its institutions. The process of contract formation must be timely, free of waste, and predictable. Suppliers should be treated equitably, and procurement officers must not enrich themselves illicitly. This second commitment is commonly measured by reliance on audit reports. etc.

In any event, operationalising these commitments is quite difficult. They are distilled by the legal framework into objectives or goals that government pursues through the system. Section 5 of The Public Procurement Act 2015 (as amended) articulates nine of them. The public procurement system seeks to be many things simultaneously efficient and economical, fair and full of integrity. It drives transparency, competition and economic growth while fostering confidence and national growth through opportunities for micro, small and medium sized enterprises.

The goals are mutually enabling. For example, a transparent and equitable system is likely to attract high rates of participation and thus increase the likelihood of achieving value for money. Similar synergies are found between integrity and value for money, between transparency and competition, and so on.

Though multiple goals are identified they are largely ignored, as Jamaica’s public procurement system remains hyper-focused on controls. This is hardly surprising given historical challenges with public financial management. For example, for contracts above $60 million, there are at least seven upward layers of approval before an award can be made. This higher number of controls actually increases complexity and perpetuates low trust. Innovation is stifled, and compliance becomes more important than the achievement of value. Moreover, transactional efficiency suffers, so that we are not achieving the level of development to which we aspire.

MAKE TRADE-OFFS

If this was not enough, procurement officers are called on to make trade-offs between these goals every day, as sometimes the goals are in tension. These are complex decisions, and the results are damning depending on which commitment you prioritise.

For example, a procurement officer has received bids from two suppliers with whom she has had previous professional experience. Supplier A has a history of on-time and on-budget delivery, and has submitted the lower bid. Supplier B has a history of poor or marginally acceptable past performance on contracts within the entity, and in other entities. Its bid is higher than the comparable estimate, but only slightly. During evaluation, the officer discovers that Supplier A failed to submit important documentary evidence which was required for proving that it had the necessary skills and competence to perform the work. In service to the objectives of transparency, equal treatment and integrity, the otherwise promising supplier is disqualified as the officer cannot substitute her knowledge of the supplier’s competence for the information it has provided.

A trade-off is required. The officer might either risk the contract award to the marginal supplier - a threat to value for money, or cancel the procurement proceedings and invite fresh bids. The time associated with the latter choice could be upwards of three months or any other number of days or months. Indeed, the officer may proceed with the award to Supplier A, increasing government’s liability. What is the ideal choice? Which outcome should be prioritised?

Similar or more compelling tensions are sorted out each day by the near 200 procurement units across the island. Absent administrative bundling, arriving at the best decision in these circumstances often contributes to latency in contract award. We should therefore be suspicious of anyone who prescribes a patchwork of measures without understanding the full picture. Public procurement is too important to each of us for easy acceptance of reductive poorly reasoned solutions. It is accepted that though our system has made gains, there is room for improvement.

Andrei Bennett is the chief public procurement policy officer in Jamaica. He is lecturer in public procurement law at The University of the West Indies, and an attorney-at-law. Send feedback to columns@gleanerjm.com and andrei.bennett@mof.gov.jm